from washington, "the mclaughlin group," the american original. for over two decades, the sharpest minds,

issue one, jamie's vicissitudes. j.p. morgan is one every best managed banks. jamie diamond is one every smarteddest bankers, and they still lost $2 billion and counting. >> if $2 billion loss is now a $3 billion loss and could bloat. president obama believers there may be a remedy, however, to these colossal losses. >> if we get all the rules that

we proposed and were passed by congress implemented into law, it should prevent this kind of stuff from happening. >> the regulatory reforms passed by congress in 2010 occurred in the wake of the financial crisis of 2008, with this massive tarp and other taxpayer bailouts. the head of j.p. morgan, jamie diamond, faced j.p. morgan shareholders on tuesday and survived. positions as chairman and ceo intact, as well as a $23 million bonus. j.p. morgan, however, is not in the clear. both the sec, the securities and exchange commission, and the fbi have launched probes. question, is obama right? if the vocal rule were already in effect, would it have prevented j.p. morgan's $2.3 billion loss, pat buchanan?

>> i think it might have, because i understand jamie diamond set up this office in london and failed to oversee it, and the losses are as you mentioned $3 billion. but they may go to 5 billion. i think what needs to be done, john, and this is an example of it, is we got to go back to what teddy roosevelt did with oil. some banks that are too big to fail should be broken up into smaller banks, secondsly the banks where we guarantee deposits and bankers and we come in and bail them out, they should be restricted in what they can do. as for the bucaneers that go out there and want abet on the -- derivatives and the rest of it, they ought to be allowed to do that. but they ought to take the losses and they ought to keep the gains and we have never to bail them out. >> eleanor? >> that's right, you don't get to be a bucaneer with the depositor's cash and the vocal rule would help avoid this kind of conflict. but the president's point is that j.p. morgan is a well run bank. jamie diamond is well

respected. and in they can engage this this risky behavior, what about all the other lesser institutions? and diamond has been in the forefront of lobbying against the vocal rule to water down the vocal rule, and i think this sidelines him to a certain extent on that. and i think it insures the vocal rule which goes into effect this summer, that the tougher version of that will be put in place some this has been a good thing at a very timely moment for the people who are urging tougher okay. mitt romney's repost. >> presidential hopeful mitt romney gave his views on j.p. morgan's losses. >> with that rush to pass new legislation or new regulation, it's just that in the normal course of business a large loss, but sure hawaii got one crippling or threatening to the institution. this is not a loss to the taxpayers of america.

this is a loss to shareholders and owners of j.p. morgan, and that's the way america works. lost someone else gained. >> what do you think of that response? >> i think it's right. this whole thing makes it clear that two kinds of wall street scandals. one when banks make money, two, when banks lose money. and you're just never able to regulate the risk out of financial business entirely, and it's not even clear the vocal rule would have applied in this case. and the vocal rule is so hideously complicated, no one knows how it will work. but draft rule had 300 pages, john, and 300 questions. so this is just a complicated business. romney is right, j.p. morgan took the loss, its stock took hi a hit and diamond's reputation took a hit this that's going to happen in a free market economy. >> mort? >> well, first place, i do think this was not the kind of trading for your own account that the vocal rule was intended to control. this was something they were

hedging in order to deal with certain potential losses or potential gains that they might of about $2 billion. now, they have a portfolio of this kind of paper of about $100 billion, so it's a 2% loss in overall terms. this is not of kind of thing that is avoid indeed a bank as big as this. and i will say i was on one every his boards for six years. he is a most talented business and just remember, he avoided this bank avoided any of the problems of the other banks came into when it came to the mortgage backed security losses of hoe studs city of it because she was on top of his game. this was a mistake. the warning pays the price for it. it's not consistent with the kind of the way it's being -- by the press. >> on top of his game, how come he let this happen. >> these things happen in a back of that size. no question. >> controllable situation?

why did he let it become uncontrollable? >> they were trying to protect and they do this as -- in the ordinary course of business, to protect against certain kinds of losses. they hedge positions. >> he didn't oversee it properly! this was his baby. help put it out there. and he didn't oversee it. [overlapping speakers] >> wait a minute! >> good executive has some losses. they thought it was a hedge, and performing well. took his eyes off the ball and he took a loss. this will happen all the time! [overlapping speakers] >> when you see a loss of this dimension, two billion now, maybe going to five billion, happening in a course of a couple weeks, there's a sense of memory of what happened in 2008. this is a well run bank. they can absorb the losses. but if this kind of behavior is going on at j.p. morgan, what is happening elsewhere? and there's more to know. there will be an investigation

hearing, and jamie diamond will have to say, what did he know and when did had know it. >> which is a point. the guy made this bet, didn't oversee it properly, took the loss. what i'm saying is, if you want to go out and do that, get yourself a separate institution. but if we're background to guarantee the deposits and pour money into these things when they go down, get out! the old glass law should never been repealed. >> i want to ask you this. does it make a difference that a hedge is involved? in other words, diamond was really protecting himself to some ex tents by having a hedge. >> that's right. >> which is a little bit intrinsically. >> but a way of managing risk. the problem you have -- when you make loans to corporations you take a risk that the corporation will pay it back. what they try to do is have what they for a category of loans, they try to have a protection against it. this -- not gambling in any sense. this was a hedge in which they were trying to protect against

a certain kind of rick. there's once -- banker should do. >> , the vocal rule would have sprung into effect if it were a matter of requirement? >> i don't believe they were training for their accounts in the sense the vocal recall recall was account. >> meaning what? using deposits as collateral, as -- the term of the loan? >> yes, they were using their -- the money that is deposited to make loans. that's the principle. some of the banks were using it to gamble in effect on -- this was not their -- they had hundreds of billions of dollars of loans outstanding, they were trying to -- >> what does the vocal rule prohibit? >> the vocal rule prohibits against proprietary training, trading for their own accounts. >> using -- [not understandable] >> the equity of a bank. >> that's right. >> that is composed of what?

deposes its of the -- >> no, no. that's the obligation. [overlapping speakers] >> the banks do not -- they use that money, but that's not the equity of the bank. this is one of best capitalized banks in the world some they can afford this. so but it did make a big -- he presented it bandly enough. >> how much does jamie diamond make a year? >> he made $23 million, i believe, last year. >> and did he get his 15 billion-dollar bonus? million dollar bonus? >> i think that's a -- includes the bonus. >> he has a very small -- >> 23 million not small. >> no! [overlapping speakers] >> that's right, roughly 7 or $8 million is his base salary punishment rest with was a bonus. >> you think come labor day, jamie will still be running the bank? >> absolutely. he is recognized by far and way the most competent banker in

the country. >> he won't be if some of the losses -- i understand this trading -- this office there had something like 100 billion, not subject to the same rules, and so it was jamie diamond's baby. if you have another big hit like that, another big hit, then i think his job is on the line. >> the dodd frank law -- >> the vocal rule is under with the that would have applied here. but the question is how much risk is too much risk? do you let the banks decide that or should they be some government regulation in place? i think we're moving towards regulation. [overlapping speakers] >> here i create a great problem because the banks center to take risks every time they makes loans. that's a risk they take. >> let rich in? >> financial sector is already heavily regulated. i mean, there's always been regulated during the housing bubble, which nearly took the system down. and if you take a maximum view and want to stop hedging,

you're actually going to make banking riskier on -- than it is now. [overlapping speakers] could ot >> let me deal -- why account canadian economy escape our problems? two reasons, one is there are just a few national banks, about 10 of them, and they've all been carefully regulated and fairly prudent. but the other thing is that you want to buy a home in canada, you want to get a mortgage in canada, you have to sign the mortgage personally. that's why their real estate re bubble never occurred. here you don't -- >> bankers suffered -- was our friends the -- went down, [overlapping speakers] lee man brothers, all the west survived and the big guys, funded by the fed. and they're back up at the same old thing. >> they're fat and happy punishment only people who paid the price are the american people who are still in a recession in part because of

all the overhang from their loans they have -- [overlapping speakers] >> some speculative-mania like the housing bubble, this kind of loss is not a threat to the entire financial system or the economy. >> why did he call this -- [overlapping speakers] >> the economy went down. we had a bank -- a financial -- [overlapping speakers] >> you understand that jamie diamond characterized this event as a temperaturest in tempest in a tea pot? they made 5 1/2 billion dollars in the first quarter. yes, they lost and still make three or four billion in the second quarter. [overlapping speakers] but it's a kind of normal risk that you take, okay? they're making $3 billion and we're having a scream fest over here? they should have made 5

billion? >> it's not a normal risk because jamie diamond himself says he didn't oversee it properly! [overlapping speakers] >> exactly what is going on on capitol hill, and the banks will be hoisted by it, because this scandal happened just at the moment when the regulations are going to kick into place and the regulators are going to win. >> you think obama should declare issue two, macho vlad! >> vladimir putin is now president of russia, sworn in in an elaborated ceremony in the ornate kremlin palace, ruling russia now for 12 years. he'll now rule it for six more years, which brings his total

numbers in years in power by 2018 to, you guessed it, 18. the day before his inauguration, 20,000 protestors in moscow demonstrated against putin. the massive inaugural a assemblage was not peaceful. the next day moscow was in lockdown mode with riot police protecting his motorcade as it moved through the ets. question, over the past six months, the rhetoric has been distinctly anti-american. what is the background of that? >> it's been anti-merge for a long time, john. i think this is a power that is in decline, that pines for the days of the cold war when actually mattered more than it does now. and the obama administration came into offers with grand idea nicer to them fine, the reset is a disaster, and no iranian sanctions, no start

three, no missile defense deal, no cooperation on syria, and that's what we're looking at. >> that was a -- determinedly bleak picture painted of russia p romney in fact is trying to recreate russia's one of our major enemies. it's really cold war rhetoric coming out of the romney campaign. i think the reset didn't work a hundred percent, but the star treaty was ratified by this president and in congress. there's still a good relationship i think between the now prime minister and the president, and we're not going to agree with the russians on every subject. be they are still a major power, if not a superpower, and to try to encourage friction with them, which is political purposes what romney it doing -- >> among many other talents, vladimir putin is multilingual, fluent and here's an example of his command of english.

♪ ♪i found my thrill on blueberry hill ♪ on blueberry hill, when i found you ♪ ♪ the moon stood still ♪ on blueberry hill ♪ and lingered until ♪ my dream came true ♪ >> what do you think of putin? >> i think fats domino is not -- what i think of putin? i think he's a russian nationalist. i think he's in office because of a feeling that the united states abused his victory in the cold war, we moved nato in

his face. we bombed serbia, we had a bunch every american advisors go there and help the -- john, russia is a natural ally of the united states and my judgment for this reason -- we have two potential adversaries coming, one is islamic world and the other is china. russia is as i say a natural ally because they have the same adversaries and i agree with obama, should you make an effort really to befriend or treat these people as equals and don't treat them the way we've ia $0obeen treating them the end of the cold war. >> putin issued apache to his ministers telling them to pursue amicable relations with the u.s. the contrast between the campaign rhetoric and the official marching orders could not be greater. >> good reason for both. when you -- there's a lot of hostility to the united states within the russian community. the russian people. and so if you're campaigning future re-election, which putin was, you certainly want to exploit that.

now that he's governing, it becomes a very different game. and he is very constructive in terms every his relations with the united states and was the first time around, which was when i met him. and he was extremely constructive in the relationship he hoped to have with the united states. >> was his relationship with george w. bush closer than his relationship with barack obama? what relationship does -- he is not even going himself to the meetings in chicago this week, nato meeting. >> i don't think there is a relationship at all with barack obama at this stage. they may develop one. but he had a good relationship with george w. bush, about i think george w. bush made a clear point of trying to establish that relationship, because those kinds of relationships make a difference in international relations. >> you think the problem is with nato? >> no, i can't -- disagree more. this is a guy who is drunk on power, imagines himself as a kind of latter day czar. this term will not end well, whether quite into mubarak territory, but the russian people do not consider this

regime legitimate and over time that will play out. >> but -- [overlapping speakers] >> yes, but why did we move nato up on to his front porch and which were three soviet republics into nato and almost bring in ukraine and georgia? that is right in your face! i understand -- [overlapping speakers] >> pre-organization, atlantic. what does that have to do with the atlantic? >> too far in eastern europe welcome should abolish nato at the end of the cold war! >> you want to abolish nato? >> at the end of the cold war, sure! it was hope for what, defending europe from the overthe is over yet union? [overlapping speakers] >> when they they put alliance with mexico and in monterrey. >> exit question, [not understandable] vladimir putin on a charisma scale zero to 10.

10 meaning charismatic like mort. >> i think blueberry hill takes him to an 8. >> i'm going to give him a 4. he's a steely figure, which is why pat likes him. but forget about abolishing nato. it won't happen. >> 4? >> no. >> i like the foreign minister. >> i like medvedev. >> i guess he's -- trying to imagine what he is to the russians. maybe a 6? she shoots lots of things. >> in russia he's one thing is pretty clear about nato, it is already confounded its skeptics. from bosnia to kosovo, from afghanistan to libya, the alliance has demonstrated an able to adapt to the post-cold- war security environment. obviously, we've had our challenges in both afghanistan and libya, but we have learned

from them. foreign relations committee, reaffirmed the u.s. alliance with nato, the north atlantic treaty organization days before its representatives converge on chicago site of what will be the biggest nato summit ever, representatives from 60 countries, that's 60, and organizations are attending well beyond the number of states, 28, that actually comprise nato. discussions on sunday and monday will focus on nato's essential involvement in the war in afghanistan and its aftermath. there's also this -- a shared missile defense shield system. nato secretary general anders rasmussen says that the alliance is determined to push ahead and building an

operational shield to counter ballistic missiles, something more than 30 countries have acquired or are working to acquire, according to rasmussen. )cyl

so what is nato today? mort? >> well, it's really a way for the collective europe in a sense to participate in major foreign policy issues. because individually, they no longer have the kind of power leech or authority they once had. but as a collective, it's a very different kind of game they can play. and i think that's the principle rule. they're not focused on the soviet union but many things in the atlantic they have to worry about and the -- mediterranean and the middle east that's affecting them and they where they play as a collecteddism but no individual country could do did. >> nato is also a fig leaf for the u.s. to enable the u.s. to engage in activities if they really couldn't do on their own. and that you can do with the -- >> libya? >> i say libya is a clear example, and nato is helpful in afghanistan too. u.s. is obviously the major player, and in chicago one of big issues will be the newly elected president of france ran

on a platform to pull out troops from afghanistan by the end of this year. now, i imagine the president will try to get them to keep training troops in or whatever, but it's important to have that overlay of other countries supporting your mission. >> that's right. but the fig leaf unfortunately is probably going to get even thinner because this euro debt crisis will hollow out the european military even more than they have been, and before they're unwilling to spend more. >> if china were to attack one of our american vessels, what would be the responsibility of nato? >> same thing they did in vietnam, which was nothing. >> that's not true. article five states that an attack on is attack on all. if -- [overlapping speakers] nato would be obliged. >> as dick lugar said after the cold war was over, nato either goes out of business or out of area. and they did go into afghan

five seconds. >> george zimmerman will never be convicted of second-degree murder. >> john edwards will not be convicted of major campaign violations. >> rich? >> if romney loses, rand paul will run for president, taking up the baton from his father. >> mort? >> china will have its first >> i predict iran is in a day talk mode and will signal a deal with